GST and E-commerce: TCS, Compliance & Operator Rules Explain

1. Introduction

In today’s world, almost everything is sold online — from food and clothes to taxis and hotel rooms. Platforms like Amazon, Flipkart, Swiggy, Zomato, Ola, and MakeMyTrip have completely changed how people buy and sell goods and services.

But this digital revolution also brought a big question: How should GST apply to e-commerce platforms?

Who pays the tax — the seller or the platform? How does the government collect GST when there are thousands of small sellers involved?

To handle this, the government included special provisions under the Goods and Services Tax (GST) law — specifically designed for E-commerce Operators (ECOs).

In this article, we’ll explain in simple terms what GST means for e-commerce, how Tax Collected at Source (TCS) works, and what compliance responsibilities platforms have.

2. What is an E-commerce Operator under GST?

According to Section 2(45) of the CGST Act, 2017,

In simple words — if a person or company runs a website or app that helps buyers and sellers connect and trade goods or services online, that person is an E-commerce Operator (ECO).

Examples of E-commerce Operators:

• Amazon, Flipkart (goods)
• Swiggy, Zomato (food delivery)
• Ola, Uber (ride-hailing)
• Airbnb, MakeMyTrip (hotel booking)
• UrbanClap (service aggregation)

So even though the ECO may not sell directly, it facilitates the supply, collects payment, and passes it to the seller — which brings it under GST scope.

3. Legal Provisions Governing E-commerce under GST

The main sections covering e-commerce in GST law are:

These sections ensure that even in online transactions, the right amount of GST reaches the government.

4. GST Liability – Who Pays the Tax?

There are two main scenarios in e-commerce under GST:

Scenario 1: ECO Facilitates Sale but Seller is Responsible for GST

When the platform acts only as a marketplace and the actual seller provides the goods/services, the seller must collect and pay GST on the sale.

Example: A seller lists shoes on Amazon. When a customer buys, Amazon facilitates the payment but doesn’t own the goods. In this case, the seller charges and pays GST, and Amazon collects TCS (we’ll discuss that below).

Scenario 2: ECO Itself is Liable to Pay GST (Section 9(5))

In some specific services, the E-commerce Operator is treated as the supplier for GST purposes, even if they are only an intermediary.

This applies to services where it’s difficult to track small suppliers individually.

Under Section 9(5) of the CGST Act, the following services are covered:

In these cases, the operator (platform), not the individual driver, hotel, or restaurant, must pay GST on the total value of the transaction.

5. Tax Collection at Source (TCS) under GST

For all other marketplace transactions (like Amazon, Flipkart, Myntra, etc.), E-commerce operators are required to collect tax at source (TCS) under Section 52 of the CGST Act.

Let’s understand how it works.

What is TCS?

TCS means that the operator collects a small percentage of the transaction value from the supplier and deposits it to the government on their behalf.

Rate of TCS:

• 0.5% CGST + 0.5% SGST (total 1%) for intra-state supplies
• 1% IGST for inter-state supplies

Example: A seller sells goods worth ₹1,00,000 on Amazon. Amazon collects 1% TCS = ₹1,000. It deposits ₹1,000 to the government and remits ₹99,000 to the seller.

This ₹1,000 appears in the seller’s GST account and can be used to claim credit.

6. Registration Requirement for E-commerce Operators

Under GST, registration is mandatory for e-commerce operators — regardless of turnover. Even if their total business is below ₹20 lakh, they must register because of their intermediary role.

Mandatory registration under:

• Section 24(ix) of CGST Act for E-commerce Operators
• Section 24(x) for suppliers who sell through e-commerce (unless exempted)

This ensures proper tracking of all online transactions.

7. Compliance and Return Filing for ECO

E-commerce operators have specific compliance duties under GST law.

The due date for GSTR-8 is the 10th of the following month.

Operators must report:

• All supplies made through their platform,
• Tax collected (TCS), and
• Supplier details.

8. Input Tax Credit (ITC) for Sellers

When e-commerce operators collect TCS, that amount is credited to the electronic cash ledger of the seller.

The seller can use it to:

• Pay output GST liability, or
• Claim as a refund if not utilized.

Note: TCS is not an additional tax — it’s just an advance deposit of the seller’s own GST.

9. E-commerce Services under Reverse Charge

If an E-commerce Operator is located outside India but provides services to customers in India (for example, Google Play Store or Amazon Web Services), GST must be paid under the Reverse Charge Mechanism (RCM) by the Indian recipient.

This ensures that even foreign online platforms are brought under GST coverage for services consumed in India.

10. Exemption for Small Suppliers (Post-2019)

Earlier, all suppliers selling through e-commerce had to register under GST, regardless of turnover. This was tough for small businesses.

To ease this burden, the government (via Notification No. 65/2017) later allowed small suppliers (with turnover below ₹20 lakh) to sell through e-commerce operators without mandatory registration, if:

• They sell only exempt goods/services, or
• The operator is liable to pay GST under Section 9(5).

This especially helped small hotel owners, cab drivers, and freelancers.

11. Example: How GST Works in E-commerce

Let’s take an example with all elements included.

Suppose a seller sells mobile phones worth ₹1,00,000 on Flipkart to a customer in Delhi.

Here’s how GST applies:

• Seller charges 18% GST = ₹18,000.
• Flipkart collects TCS @1% = ₹1,000.
• Flipkart pays ₹1,000 to the government and ₹99,000 to the seller.
• Seller files returns and claims ₹1,000 TCS credit in GSTR-2A.

Everything gets automatically reflected in the seller’s GST records — ensuring transparency.

12. GST on Food Delivery Apps (Like Swiggy & Zomato)

From January 1, 2022, the government made a major change. Now, Swiggy and Zomato must collect and pay GST directly on restaurant services (under Section 9(5)).

This means:

• Restaurants don’t need to pay GST separately for online orders.
• The E-commerce Operator (app) collects tax on the total bill value and remits it to the government.
• This prevents revenue leakage and simplifies compliance.

Example: A customer orders food worth ₹500 through Zomato. Zomato charges GST @5% = ₹25. Zomato pays ₹25 directly to the government — the restaurant only receives ₹475.

13. Advantages of GST for E-commerce

• Transparency: - Every transaction is traceable through the GST portal.
• Accountability: - Both seller and platform are registered and report returns.
• Simplified Credit System: - TCS automatically reflects in seller’s account — reducing errors.
• Level Playing Field: - Brings online and offline businesses under the same tax umbrella.

14. Challenges Faced by E-commerce Platforms

While GST made digital trade transparent, it also added some compliance challenges:

• Tracking millions of small sellers and tax records.
• Handling TCS reconciliation and refunds.
• Rate confusion on bundled goods/services.
• Responsibility shift under Section 9(5) for services like food delivery and ride-hailing.

Still, most operators have integrated automated GST systems to make compliance smoother.

15. Key Notifications and Circulars on E-commerce GST

These updates ensure clarity and fairness for all online platforms.

16. Final Thoughts

The GST framework for E-commerce Operators has made digital business more accountable, transparent, and standardized.

Whether you’re a seller on Amazon or a cab driver using Ola, GST ensures that taxes are properly tracked and collected.

With the introduction of TCS, RCM, and Section 9(5) provisions, the government has effectively brought the fast-growing e-commerce ecosystem under the tax net — without overburdening small sellers.

Going forward, as more people shift to online buying and services, these GST rules will continue to evolve, making digital commerce even more structured and fair.

Also Read: Real Estate Sector GST Rates – Complete Study Guide